Sorrento Pavilion, LLC, et al. v. East West Bank, et al. CASE NO. 112CV233122
DATE: 13 June 2014 TIME: 9:00 LINE NUMBER: 18
This matter will be heard by the Honorable Judge Socrates Peter Manoukian in Department 19 in the Old Courthouse, 2nd Floor, 161 North First Street, San Jose. Any party opposing the tentative ruling must call Department 19 at 408.808.6856 and the opposing party no later than 4:00 PM Thursday 12 June 2014. Please specify the issue to be contested when calling the Court and counsel.

On 13 June 2014, the following three motions were argued and submitted: (1) the motion of plaintiffs Sorrento Pavilion, LLC (“Sorrento”), Teri Nguyen and Vince Nguyen (collectively “Plaintiffs”) to compel defendant East West Bank (“EWB”) to provide unredacted copies of certain documents produced in response to Plaintiffs’ second set of requests for production of documents (“RPD”); (2) the motion of defendants EWB, East-West Investment, Inc., John Chen and Betty Liaw (collectively “Defendants”) for reconsideration of the Court’s 28 May 2014 order denying Defendants’ motion to compel the deposition of Sorrento’s Person Most Knowledgeable (“PMK”); and (3) Plaintiffs’ motion for reconsideration of the Court’s 15 May 2014 order denying Plaintiffs’ motion to compel in camera inspection and production of claw back documents.

EWB filed a formal opposition to Plaintiffs’ motion to compel unredacted copies of documents produced in response to Plaintiffs’ second set of RPD. Plaintiffs filed a formal opposition to Defendants’ motion for reconsideration. Defendants filed a formal opposition to Plaintiffs’ motion for reconsideration.

All parties are reminded that all papers must comply with California Rules of Court, rule 3.1110(f).

Statement of Facts

Vince Nguyen and Teri Nguyen (collectively the “Nguyens”) are husband and wife and the sole members of Sorrento. According to the allegations of the operative Second Amended Complaint (“SAC”), in 2004, the Nguyens, through Sorrento, purchased a one acre property consisting of two parcels located on South Winchester Boulevard in San Jose (“Property”). In 2005, Plaintiffs began construction of a 13,400 square foot plaza consisting of two buildings on the Property. In order to finance construction, Plaintiffs obtained a $4 million construction loan from United Commercial Bank (“UCB”). Plaintiffs completed construction in March 2008.

Defendant Betty Liaw (“Liaw”) originated the UCB construction loan. Plaintiffs had a working relationship with Liaw dating back to 1992 when Liaw worked as a manager at Lippo Bank. The Nguyens considered Liaw to be a trusted advisor and Liaw had been the loan manager for multiple commercial real estate loans to the Nguyens. In 2007, Liaw transferred to EWB to become branch manager.

After moving to EWB, Liaw warned the Nguyens that UCB was in financial trouble and suggested they move their banking portfolio to EWB. Liaw proposed the Nguyens refinance the three commercial property loans held by UCB—the loan for the construction of the Property and two additional unrelated loans concerning land in Sacramento and Manteca. In December 2007, prior to completion of the construction at the Property, Liaw convinced the Nguyens to refinance the $3.9 million UCB construction loan with a $4.5 million loan from EWB.

Prior to the closing of the loan, Liaw informed the Nguyens that, due to the downturn in the national economy, EWB could offer only $4 million. Plaintiffs allege that the $500,000 difference was significant because they intended to use that money to meet the monthly payments on the loan itself while construction was being completed. Despite the shortfall, the Nguyens accepted the $4million loan.

In early 2009, EWB loaned Sorrento an additional $300,000 and assured Plaintiffs that EWB would loan an additional $200,000. By the fall of 2009, Plaintiffs desperately needed the additional $200,000. Plaintiffs allege that, while Liaw continued to promise that the additional money was forthcoming, she and EWB secretly sold the $4 million loan to a company called SyWest. Once SyWest obtained the loan, it promptly initiated foreclosure proceedings on the Property based upon Plaintiffs’ default on the loan.

On September 27, 2012, Plaintiffs commenced the instant action, alleging that Liaw and EWB made material misrepresentations and omissions to the Nguyens regarding the loan, which ultimately led to the foreclosure of the Property. Plaintiffs’ SAC asserts 22 causes of action, including, among others, causes of action for breach of contract, wrongful foreclosure, conspiracy, fraud, unfair business practices, interference with prospective economic advantage, and negligent infliction of emotional distress.

Discussion

I. Plaintiffs’ Motion to Compel Production of Unredacted Documents

Plaintiffs seek an order compelling EWB to produce unredacted copies of the documents EWB produced in response to Plaintiffs’ second set of RPD. Plaintiffs also seek a privilege log setting forth the basis upon which the redactions were made.

A. Facts Giving Rise to the Discovery Dispute

On 10 February 2014, Plaintiffs served Defendant with their second set of RPD. RPD No. 1 sought documents describing EWB’s guidelines pertaining to Notices of Intent to Foreclose or Notice of Default, and RPD No. 2 sought documents concerning EWB’s guidelines pertaining to late fees and default interest on commercial real estate loans.

On 28 March 2014, Defendant served Plaintiffs with its responses to the requests and, on 5 May 2014, Defendant served further responses. The further responses indicated that Defendant will produce all nonprivileged documents responsive to RPD Nos. 1 and 2, “subject to the redaction from those documents of information which has not been requested.” (Decl. of Christine Long in Support of Pl.s’ Mot. to Compel (“Decl. of Long”), Ex. C.)

On 13 and 16 May 2014, counsel for Plaintiffs sent emails to counsel for Defendant, inquiring as to when the documents agreed to be produced in Defendant’s responses would in fact be produced. (Decl. of Long, ¶¶ 7-8.)

On 19 May 2014, counsel for Defendant wrote to Plaintiffs’ counsel, indicating that “all of the non-privileged documents responsive to Sorrento’s Second Inspection Demand were produced as EWB 032549-032560 and were designated as confidential.” (Id., Ex. F.)

When counsel for Plaintiffs reviewed the documents, she found that they contained several redactions.

On 19 May 2014, Plaintiffs’ counsel sent another letter to defense counsel, asking that Defendant provide unredacted versions of the documents and a privilege log concerning the redactions. (Id., Ex. H.)

Defense counsel responded on 21 May 2014, and stated the following:

Some of the documents produced were redacted, but not because they contained privileged information. Rather, these documents were redacted because they contained confidential information which was not requested. This is clearly stated in the responses and on the redacted documents themselves, which were labeled “REDACTED – NONRESPONSIVE.” (Id., Ex. I.)

Plaintiffs’ counsel responded to defense counsel’s email the same day, asking defense counsel to explain “how the procedures for handling troubled loans is ‘non-responsive[]’” and asserting that “[w]hatever is in the guidelines should be produced.” (Id.)

On 21 May 2014, without waiting to receive a response from defense counsel, Plaintiffs filed the first motion presently before the Court, seeking an order compelling Defendant to produce unredacted copies of the guidelines and policies governing foreclosure that were produced by Defendant.

Defendant filed an opposition to the motion on 2 June 2014, and Plaintiffs filed their reply brief on 6 June 2014.

B. Request for Judicial Notice

In connection with Plaintiffs’ motion to compel the production of unredacted documents, Defendant requests that the Court take judicial notice of (1) the Court’s order of 15 May 2014, which, among other things, denied Plaintiffs’ previous motion to compel a privilege log, and (2) Defendant’s opposition to Plaintiffs’ previous motion asking the Court to order Defendant to produce a privilege log.

The Court’s order and Defendant’s opposition filed in connection with Plaintiffs’ previous motion constitute records of the superior court subject to judicial notice under Evidence Code section 452, subdivision (d). (See Stepan v. Garcia (1774) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) They are also relevant to the matter presently before the Court. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [information subject to judicial notice must be relevant to the issue at hand].) Defendant’s request for judicial notice is therefore GRANTED.

C. Nature of Motion

As an initial matter, Plaintiffs have failed to cite the statutory basis for the relief requested in their motion. This failure has created some confusion as to the nature of the motion. Specifically, treating the motion as one for further responses—as opposed to a motion to compel compliance—Defendant asserts that Plaintiffs’ motion should be denied for failing to set forth good cause for the requested documents. For the reasons set forth below, given the relief requested in the motion, the Court finds that the motion should be construed as one to compel compliance.

Pursuant to Code of Civil Procedure section 2031.310, upon receipt of a response to a request for the production of documents, the requesting party may move for an order compelling a further response if it deems that a response is incomplete or evasive, or an objection to the request is without merit or too general. (Code Civ. Proc. [“CCP”], § 2031.310, subd. (a).) A motion to compel a further response must set forth “specific facts showing good cause justifying the discovery sought by the demand.” (CCP, § 2031.310, subd. (b)(1).) Good cause is established through a fact-specific showing of relevance. (See Kirkland v. Super. Ct. (2002) 95 Cal.App.4th 92, 98.)

In addition to the Code’s authorization of motions to compel further responses, under Code of Civil Procedure section 2031.320, if a party indicates in a response that it will produce documents responsive to a request and thereafter fails to produce the documents in accordance with the statement of compliance, the requesting party may move for an order compelling compliance. (See CCP, § 2031.320, subd. (a).) Unlike motions to compel further responses, there is no obligation to meet and confer prior to bringing a motion to compel compliance and there is no time limit for the motion. (See id.) Similarly, there is no requirement that the moving party demonstrate good cause—the moving party only is required to show that the responding party agreed to produce the documents and then failed to do so in accordance with its statement of compliance. (See Standon Co., Inc. v. Super. Ct. (1990) 225 Cal.App.3d 898, 903.)

Here, there is no dispute that Defendant agreed to produce all non-privileged documents responsive to RPD Nos. 1 and 2. Indeed, Defendant did produce documents responsive to the requests, but redacted portions of the documents as “non-responsive.” Plaintiffs believe that the redacted portions of the documents are responsive to the requests and now ask the Court to compel Defendant to produce unredacted versions of the documents in accordance with its statement of compliance.

Given the nature of the relief requested in Plaintiffs’ motion, the Court finds that the motion is properly characterized as a motion to compel compliance under Code of Civil Procedure section 2031.320. Accordingly, contrary to Defendant’s assertion, there is no requirement that Plaintiffs make a showing of good cause for the documents. Moreover, the Court will overlook Plaintiffs’ failure to cite the statutory basis for the motion because their papers make clear the grounds for the relief sought. (Luri v. Greenwald (2003) 107 Cal.App.4th 1119, 1125 [“An omission in the notice may be overlooked if the supporting papers make clear the grounds for the relief sought.”].)

D. Analysis

RPD No. 1 sought documents evidencing EWB’s practice, procedures, policies, and guidelines pertaining to the issuance of Notices of Intent to Foreclose and Notices of Default on commercial real estate loans. (Pl.s’ Separate Statement, p. 2.) Similarly, RPD No. 2 asked Defendant to produce all documents describing EWB’s practice, procedure, policies, rules and/or guidelines pertaining to late fees and default interest on commercial real estate loans.

After setting forth several objections to the requests, Defendant responded to RPD Nos. 1 and 2 by stating that, “without waiving such objections, all nonprivileged documents responsive to this request will be produced, subject to the redaction from those documents of information which as not been requested.” (Pl.s’ Separate Statement, pp. 2-4.)

In accordance with its statement of compliance, Defendant produced documents entitled “Filing of Notice of Default (NOD) and Follow Up Guidelines: (Revised) dated 10/03/2011,” “Foreclosure Matrix,” and “Commercial Lending Procedures.” (Decl. of Long, Ex. G.) Portions of each of the documents are redacted.

The redactions contained in the first document are illustrative of the whole. The first document sets forth the steps to be taken pertaining to the filing of a notice of default. The document contains a spreadsheet setting forth the various steps. The first box sets forth the first step as follows: “1. Send Notice of Intent letter (NOI) to the borrower.” (Decl. of Long, Ex. G.) In the space where the second step should be, Defendant inserted the following language: “REDACTED – NONRESPONSIVE.” (Id.) The document then sets forth steps 3 through 11, followed by another indication that the remaining material has been redacted as “NONRESPONSIVE.” (Id.)

Plaintiffs assert that the information redacted from the guidelines and policies is necessarily responsive to the requests and that Defendant should therefore be compelled to produce unredacted copies of the documents. Defendant disagrees, arguing that the requests at issue are very narrowly drawn and that “[t]he Bank should not be required to produce documents reflecting information [that was] not requested.” (Opp., p. 1.)

Defendant’s argument is not well-taken. The Civil Discovery Act does not provide guidance as to when the use of redactions is proper and the case law on the topic is sparse. However, the court of appeal has suggested that the responding party is required to provide substantial justification for redactions. (See Doe v. U.S. Swimming, Inc. (2011) 200 Cal.App.4th 1424.)

Here, Defendant does not assert that the redacted information is irrelevant or otherwise objectionable. Rather, Defendant claims that it was redacted simply because Plaintiffs did not ask for it. While Defendant is correct as a general matter that a responding party need not produce information that has not been requested, the Court finds that Defendant has taken an impermissibly narrow view of the scope of the requests at issue. Contrary to Defendant’s assertion that the requests are “very narrow,” the Court sees the scope of the requests as rather broad. For example, RPD No. 1 seeks “all documents” describing EWB’s “practice, procedure, policies, rules and/or guidelines pertaining to [EWB’s] issuance of Notices of Intent to Foreclose and/or Notices of Default . . . including but not limited to any memorandum, manual, or handbook . . . .” (Pl.s’ Separate Statement, p. 2, capitalization omitted.)

Defendant produced certain guidelines responsive to the requests, including a document setting forth the steps that employees at EWB were required to take when providing a borrower with a notice of default. Defendant concedes that some of the steps in the guidelines are responsive but asserts that others are not. Defendant, however, has not explained how the redacted steps are nonresponsive and, given Defendant’s concession that some of the steps are responsive, the Court cannot conceive a way in which the first step in the process would be responsive and the third step would be responsive, but the second step would not. The remaining redactions are subject to the same analysis. In other words, as with the guidelines governing notices of default, the remaining redactions appear within documents that Defendant concedes are responsive and Defendant has failed to explain to the Court how the redacted information is not responsive.

Based upon the above discussion, the Court finds that Defendant has failed to provide substantial justification for the redactions. (See U.S. Swimming, Inc., supra, 200 Cal.App.4th at p. 1435.) Consequently, Plaintiffs’ motion to compel Defendant to produce unredacted versions of the documents is GRANTED.

Because Defendant will be required to produce unredacted versions of the documents, Plaintiffs’ request that Defendant be required to provide a privilege log concerning the redactions is DENIED AS MOOT.

II. Motions for Reconsideration or Renewal under Code of Civil Procedure Section 1008

Plaintiffs and Defendants have both filed motions for reconsideration or, in the alternative, to renew motions that were previously heard and denied by the Court under Code of Civil Procedure section 1008, subdivisions (a) and (b). Specifically, Defendants ask the Court to reconsider the order entered on 28 May 2014, denying Defendants’ motion to compel Sorrento to produce a PMK for deposition and as the documents requested in the deposition notice. Plaintiffs ask the Court to reconsider the order entered on 15 May 2014, denying Plaintiffs’ motion to compel in camera inspection and production of documents that were purportedly inadvertently produced and then clawed back on the basis of the attorney-client privilege.

A. Request for Judicial Notice

In connection with Defendants’ motion for reconsideration, Plaintiffs ask the Court to take judicial notice of the following documents: (1) Plaintiffs’ opposition, filed 21 May 2014, to Defendants’ motion to compel Sorrento to produce a PMK and documents requested in the deposition notice; (2) Plaintiffs’ separate statement, filed 21 May 2014, in support of its opposition to Defendants’ motion to compel Sorrento to produce a PMK; (3) the declaration of Vince Nguyen, filed 21 May 2014, in support of Plaintiffs’ opposition to Defendants’ motion to compel Sorrento to produce a PMK; (4) the declaration of Teri Nguyen, filed 21 May 2014, in support of Plaintiffs’ opposition to Defendants’ motion to compel Sorrento to produce a PMK; and (5) the declaration of Christine Long, filed on 21 May 2014, in support of Plaintiffs’ opposition to Defendants’ motion to compel Sorrento to produce a PMK.

The above listed documents constitute records of the superior court subject to judicial notice under Evidence Code section 452, subdivision (d). (See Stepan v. Garcia (1974) 43 Cal.App.3d 497, 500 [the court may take judicial notice of its own file].) They are also relevant to the matter presently before the Court. (Gbur v. Cohen (1979) 93 Cal.App.3d 296, 301 [information subject to judicial notice must be relevant to the issue at hand].) Plaintiffs’ request for judicial notice of the above listed documents on file with the Court is therefore GRANTED.

B. Legal Standard

Section 1008 of the Code of Civil Procedure is the exclusive means for a party to call upon a court to revisit interim rulings. (See CCP, § 1008, subd. (e); see also Standard Microsystems Corp. v. Winbond Electronics Corp. (2009) 179 Cal.App.4th 868, 885.) The Code section provides for two types of motions: (1) motions for reconsideration, and (2) motions to renew previous motions.

Motions for reconsideration are governed by section 1008, subdivision (a), which requires that any such motion be (1) filed “within 10 days after service upon the party of written notice of entry of the order” of which reconsideration is sought, (2) supported by new or additional facts, circumstances of law, and (3) accompanied by an affidavit detailing the circumstances of the first motion and the resects in which the new motion differs from the first. (CCP, § 1008, subd. (a).)

Motions for renewal are governed by section 1008, subdivision (b), which echoes the requirements for motions for reconsideration with the exception that motions for renewal are not subject to the 10-day time limit. The provision provides that, “[a] party who originally made an application for an order which was refused in whole or part . . . may make a subsequent application for the same order upon new or different facts, circumstances, or law.” (CCP, § 1008, subd. (b).)

For both types of motions, the moving party must present “a satisfactory explanation for failing to provide the evidence earlier, which can only be described as a strict requirement of diligence.” (See Garcia v. Hejmadi (1997) 58 Cal.App.4th 674, 690.) According to the plain language of the statute, a court acts in excess of its jurisdiction when it grants a motion to reconsider or renew that is not based upon new or different facts, circumstances, or law. (CCP, § 1008, subd. (e) [“This section specifies the court’s jurisdiction with regard to applications for reconsideration of its orders and renewals of previous motions, and . . . [n]o application to reconsider any order or for the renewal of a previous motion may be considered by any judge or court unless made according to this section.”]; see also Gilberd v. AC Transit (1995) 32 Cal.App.4th 1494, 1500, internal quotation marks and citation omitted.)

C. Defendants’ Motion

On 14 May 2014, Defendants filed a motion to compel Sorrento to designate and produce a PMK for a deposition and for the PMK to produce the documents requested in the deposition notice. The motion was originally scheduled to be heard on 6 June 2014, but given the fact that several motions filed by both parties were then pending, in an effort to conserve judicial resources, the Court advanced the hearing to 28 May 2014, so that a number of the motions could be heard together.

On 28 May 2014, following a hearing in which the parties presented oral arguments on the pending motions, the Court denied Defendants’ motion to compel Sorrento to produce a PMK. The Court denied Defendants’ motion on alternative grounds.

First, the Court held that California Rules of Court, rule 3.1345(a)(5) requires the filing of a separate statement and that Defendants’ failure to file a separate statement “compels the denial of a motion on this ground alone.” (Order dated 28 May 2014, p. 5.)

In the alternative, the Court stated that, “even on the merits of the motion, it is hard to see why Plaintiff Sorrento Pavilion, LLC would have file material on other properties owned by the Nguyens.” (Id.) In other words, the Court found that the documents sought through the PMK deposition notice were directed to properties owned by the Nguyens themselves (as opposed to Sorrento) and that the requested documents were therefore not the proper subject of a PMK deposition notice directed at Sorrento.

Defendants now claim that both of the alternative findings upon which the Court denied the motion are inaccurate. Specifically, Defendants assert that, contrary to the Court’s order, they did in fact file a separate statement in support of there motion and have submitted a file-stamped copy of the separate statement. Defendants also assert that, although some of the requests sought information related to the Nguyens, some of the requests were properly directed to Sorrento and the Court did not address those requests. Ultimately, Defendants argue that the Court should revisit its 28 May 2014 order “to prevent injustice and permit Defendants the opportunity to depose the lead Plaintiff in this case once prior to trial.” (Def.s’ Mot. for Reconsideration, p. 7.)

As a threshold matter, Defendants have not presented new or different facts that were unavailable to Defendants at the time of the hearing on the motion. In the declaration in support of the motion for reconsideration, defense counsel asserts that it is a “new fact” that the Court inaccurately held that Defendants did not file a separate statement and that it is a new fact that the Court incorrectly “conclude[d] that Defendants sought only documents pertaining to “other properties” owned by Plaintiffs when, in fact, . . . Nos. 9-11, 13, 14, 21 and 22 do not pertain to other properties.” (Decl. of Timothy Martin in Support of Def.s’ Mot. for Reconsideration, ¶¶ 3-4.)

The “facts” relied upon by Defendants are not new facts within the meaning of section 1008. Similarly, while they may be different from the facts relied upon by the Court, Defendants have made no showing that the facts could not have been presented earlier. Essentially, Defendants are not claiming that there are new facts warranting a different outcome, but simply that the Court got the facts wrong. This is not a proper basis to bring a motion under Code of Civil Procedure section 1008.

Because Defendants have not presented new or different facts that through due diligence could have been presented to the Court prior to the Court’s ruling, the Court lacks jurisdiction to consider Defendants’ motion. (Gilberd, supra, 32 Cal.App.4th at p. 1500.) Consequently, Defendants’ motion for reconsideration is DENIED.

While Code of Civil Procedure section 1008 imposes a jurisdictional limitation on a party’s ability to file repetitive motions, it does not limit the Court’s inherent authority to reconsider a prior interim ruling on its own motion. ( (2005) 35 Cal.4th 1094, 1105.) Indeed, the California Supreme Court has indicated that “[f]orcing the parties to proceed where there is a recognized error in the case would result in an enormous waste of the court’s and the parties’ resources.” (Id., at p. 1106-1107.)

On its own motion, the Court has taken a second look at the record to see whether the factual findings relied upon to deny Defendants’ motion to compel Sorrento to produce a PMK for deposition were accurate. Upon further review, the Court found that Defendants did file a separate statement in support of their motion. Consequently, the “absence of a separate statement” was an improper basis to deny the motion. The Court also reviewed the deposition notice, and found that Defendants are correct that not all of the documents sought through the notice related to properties owned by the Nguyens. However, the areas of inquiry listed in the PMK deposition notice (and many of the requests) did seek information and documents unrelated to Sorrento. Thus, the second basis for denying the motion was proper.

Defendants do, however, have the right to take the deposition of Sorrento’s PMK. The fact that the documents related to Sorrento may have already been requested from the Nguyens does not affect Defendants’ ability to request them from another party. (See Carter v. Super. Ct. (1990) 218 Cal.App.3d 994, 997 (use of one discovery method does not prohibit use of another method and the Civil Discovery Act authorizes parties to use all “authorized procedures”].)

Similarly, the fact that the Nguyens have already been deposed in their individual capacity does not limit Defendants’ ability to depose Sorrento’s PMK even if one of the Nguyens is ultimately designated as such. (See CCP, § 2025.610, subd. (c)(1); see also, Weil & Brown, California Practice Guide: Civil Procedure Before Trial (Rutter Group 2012) at 8:482 [the limitation against taking more than one deposition from a natural person does not apply where the person designated to testify on behalf of a business entity was previously deposed in his or her individual capacity].)

Based upon the above discussion, on the Court’s own motion, the order dated 28 May 2014 denying Defendants’ motion to compel Sorrento to produce a PMK for deposition shall be modified as follows: The motion by Defendants to compel Sorrento to produce a PMK for a deposition and to produce documents in accordance with the deposition notice is DENIED without prejudice to Defendants serving an amended code-compliant PMK deposition notice on Sorrento that is properly limited (both in areas of inquiry and the documents requested to be produced) to matters that an officer, director, managing agent, or employee of Sorrento would be qualified to testify. (CCP, § 2025.230.)

As an additional matter, Plaintiffs request the imposition of monetary sanctions in connection with Defendants’ motion for reconsideration. Plaintiffs assert that the motion constitutes a misuse of the discovery process and direct the Court to the decision in Mattco Forge v. Arthur Young & Co. (1990) 223 Cal.App.3d 1429, 1441, where the court stated that “[w]e see no reason why a motion for reconsideration of a discovery sanction award, made without substantial justification and in the absence of other circumstances making an award of sanctions unjust, should not be viewed as an abuse of the discovery process.” Assuming that the holding in Mattco Forge authorizes an award of monetary sanctions in connection with motions for reconsideration—an issue which the Court does not decide here—the Court finds that, by pointing out factual errors in the Court 28 May 2014 order, Defendants acted with substantial justification. Plaintiffs’ request for monetary sanctions is therefore DENIED.

D. Plaintiffs’ Motion

On 22 February 2014, pursuant to the claw-back procedures set forth in Code of Civil Procedure section 2031.285, defense counsel requested that counsel for Plaintiffs return 38 emails previously produced by Defendants during the course of discovery, asserting that the emails were protected from disclosure by the attorney-client privilege and attorney work product doctrine. Plaintiffs’ counsel returned the documents and Defendants produced a privilege log on 28 February 2014. The first 11 of the entries in the privilege log are communications from or to persons associated with EWB and Doug Krause, an in-house attorney at EWB.

On 24 March 2014, Plaintiffs filed a motion to compel the in camera inspection of all 38 emails.

On 15 May 2014, the Court entered an order denying Plaintiffs’ motion to compel in camera inspection of the claw-back documents. The Court began its analysis with the well-settled rule that the party claiming the privilege bears the initial burden of establishing the preliminary facts necessary to support the claim that the communication at issue falls within the privilege, i.e., that the communication was made in the course of the lawyer-client relationship. (Order dated 15 May 2014, p. 4, citing Wellpoint Health Networks, Inc. v. Super. Ct. (1997) 59 Cal.App.4th 110, 130.) The Court then noted that, once the objecting party has established the facts necessary to support a prima facie claim of privilege, the communication is presumed confidential, and the burden shifts to the party seeking discovery to disprove the underlying facts supporting the contention that the communications were made during the course of a lawyer-client relationship or to prove some applicable statutory exception to the privilege such as waiver. (See Clark v. Super. Ct. (2011) 196 Cal.App.4th 37, 49.)

Relying upon Defendants’ assertion that the emails at issue were exchanged between employees of EWB and the company’s in-house counsel, the Court found that Defendants had met their initial burden of demonstrating that the communications were made during the course of the attorney-client relationship—giving rise to the presumption that the communications were confidential and shifting the burden to Plaintiffs to disprove the underlying facts supporting the privilege. The Court noted that Plaintiffs expressed the belief that the communications from EWB’s in-house counsel may have been made in the attorney’s capacity as a business associate of the company rather than in his capacity as an attorney.

The Court ultimately concluded, however, that “Plaintiffs’ speculation that these emails contain only business advice is insufficient to rebut the presumption of confidentiality.” (Order dated 15 May 2014, p. 4.) Finally, the Court explained that it could not conduct in camera review of the documents where the presumption of confidentiality had not been rebutted. (Id., citing Costco Wholesale Corp. v. Super. Ct. (2009) 47 Cal.4th 725, 470.) Based upon these factual and legal findings, the Court denied Plaintiffs’ motion to compel in camera inspection of the clawed-back documents.

On 2 June 2014, following the denial of Plaintiffs’ motion to compel in camera inspection of the clawed-back documents, Plaintiffs took the deposition of Flora Look, who worked as the First Vice President and head of EWB’s risk resolution group from 2003 until July 2009. (Rough Draft Deposition Transcript for the Deposition of Flora Look, pp. 12:2-9, 29:1-5, attached as Ex. 4 to the Decl. of Christine Long in Support of Pl.s’ Mot. for Reconsideration.) During the deposition, Ms. Look testified to the following: she was the “head” of the “risk resolution group” (id., p. 29:1-5); defaulted loans, including Sorrento’s loan, were reviewed by the risk resolution group (id., pp. 30:18-24, 34:8-11); and the risk resolution group conducted weekly meetings with senior EWB management, which included Doug Krause, who gave directions as to what to do with the ‘problem’ loans (id., pp. 34:22-23, 37:19-23, 39:4-6, 87:7-19).

Ms. Look testified that Doug Krause was sometimes on the weekly calls with the risk resolution group. (Id., p. 87:21-24.) Plaintiffs’ counsel then asked Ms. Look the following question:

Q. When he [referring to Doug Krause] was on the weekly calls, was he acting as a lawyer for the company? (Id., pp. 87:25-88:1.)

In response, Ms. Look answered as follows:

A. No. He was – he’s our chief risk officer. (Id., p. 88:3-4.)

Plaintiffs now contend that Ms. Look’s testimony provides new facts upon which the Court should revisit its ruling denying Plaintiffs’ motion to compel in camera inspection the clawed-back documents.

Plaintiffs move the Court to reconsider the 15 May 2014 order under Code of Civil Procedure section 1008, subdivision (a), or, in the alternative, as a motion to renew their motion for in camera inspection pursuant to section 1008, subdivision (b). Motions for reconsideration under section 1008, subdivision (a) must be filed “within 10 days after service upon the party of written notice of entry of the order.” In contrast, section 1008, subdivision (b), authorizing motions for the renewal of previously denied motions based upon new or different facts, contains no time limit in which the party must make the application to renew a motion.

Plaintiffs assert that the 10-day limitation period under section 1008, subdivision (a) did not begin to run until Defendants served them with notice of the order. (Mem. in Support of Pl.s’ Mot. for Reconsideration, p. 6.) In support of that position, Plaintiffs cite Forrest v. Department of Corporations (2007) 150 Cal.App.4th 183, which held that the 10-day period does not begin to run until the prevailing party serves notice of the court’s order on the other parties, unless notice is waived by all parties in open court and entered in the minutes. (Id., at p. 203, quoting Code of Civil Procedure section 1019.5.)

\Here, the situation is complicated by the fact that the 15 May 2014 order addresses multiple motions filed by both parties, some of which were granted in part and denied in part and others which were denied outright as to both parties. In other words, the determination as to who prevailed on the motions for the purposes of which party was required to serve notice of the motions under Code of Civil Procedure section 1019.5 is not exactly a straight forward determination. This issue, however, is not problematic because Plaintiffs are entitled to the same relief under section 1008, subdivision (b). The Court will therefore treat Plaintiffs’ motion as one to renew its motion to compel in camera inspection of the clawed-back documents.

As indicated above, the Court based its denial of Plaintiffs’ motion to compel inspection of the clawed-back documents on the fact that Plaintiffs failed to rebut Defendants’ preliminary showing that the emails at issue were sent from or to Doug Krause—EWB’s in-house attorney—and that the showing gave rise to the presumption that the communications were made during the course of the attorney-client relationship. Plaintiffs have now presented facts gained from one of EWB’s former employees indicating that, when Mr. Krause was instructing the risk resolution group as to how to deal with problem loans, he was acting in his capacity as EWB’s chief risk officer—not in his capacity as in-house counsel. The Court finds that Ms. Look’s testimony constitutes new facts within the meaning of Code of Civil Procedure section 1008. The Court therefore has jurisdiction to consider the motion.

Defendants do not challenge the assertion that Ms. Look’s testimony constitutes new facts. They argue, however, that the testimony should not alter the Court’s original analysis. Specifically, Defendants contend that Ms. Look’s testimony concerning Doug Krause and his role at EWB is general in nature—concerning the weekly meetings with the risk resolution group—and that the testimony does not specifically address the emails in question. (Def.s’ Opp. to Pl.s’ Mot. for Reconsideration, p. 1.) Along these same lines, Defendants have submitted the supplemental declaration of Doug Krause, in which he declares that the specific emails at issue (items 1-11 on the privilege log) were sent or received by Mr. Krause when he was acting in his capacity as in-house counsel. (Supp. Decl. of Doug Krause, ¶ 5.)

Contrary to Defendants’ argument, the Court believes that Ms. Look’s testimony does alter the privilege analysis. First, it is well-settled that the attorney-client privilege only applies to legal—as opposed to business—advice. (Chicago Title Ins. Co. v. Super Ct. (1985) 174 Cal.App.3d 1142, 1151; see also Zurich American Ins. Co. v. Super. Ct. (2007) 155 Cal.App.4th 1485, 1504.) Second, while it is true that, except in limited situations, a court may not require disclosure of information claimed to be privileged in order to rule on the claim of privilege, “[t]he rule does not preclude the court from reviewing the facts asserted as the basis for the privilege. (Cornish v. Super. Ct. (1989) 209 Cal.App.3d 467, 480.) Put another way, where the facts underlying the assertion of the attorney-client privilege have been sufficiently rebutted, the Court may inspect the communications through in camera review. (See Moeller v. Super. Ct. (1997) 16 Cal.4th 1124, 1135.) Here, given Ms. Look’s testimony concerning Mr. Krouse’s role at EWB during the relevant time frame, the Court finds that Plaintiffs have presented facts that tend to rebut the assertion that the communications were made during the course of a lawyer-client relationship. In light of these circumstances, the Court finds that in camera inspection of the documents is appropriate.

Based upon the above discussion, the Court finds that Plaintiffs are entitled to the relief they seek. Accordingly, their motion to renew their motion to compel Defendants to produce items 1-11 listed in their privilege log for in camera inspection is GRANTED.

Conclusion and Order

Defendants’ request for the Court to take judicial notice of certain documents in connection with Plaintiffs’ motion to compel the production of unredacted documents is GRANTED.

Plaintiffs’ motion to compel EWB to produce unredacted versions of the documents is GRANTED. EWB shall serve Plaintiffs with unredacted copies of the documents produced in response to RPD Nos. 1 and 2 of Plaintiffs’ second set of document requests within 20 calendar days of the filing of this Order.

Plaintiffs’ request for the Court to take judicial notice of certain documents in connection with Defendants’ motion for reconsideration is GRANTED.

Defendants’ motion for reconsideration is DENIED.

On the Court’s own motion, the order dated 28 May 2014 denying Defendants’ motion to compel Sorrento to produce a PMK for deposition shall be modified as follows: The motion by Defendants to compel Sorrento to produce a PMK for a deposition and to produce documents in accordance with the deposition notice is DENIED without prejudice to Defendants serving an amended code-compliant PMK deposition notice on Sorrento that is properly limited (both in areas of inquiry and the documents requested to be produced) to matters that an officer, director, managing agent, or employee of Sorrento would be qualified to testify. (CCP, § 2025.230.)

Plaintiffs’ request for monetary sanctions in connection with Defendants’ motion for reconsideration is DENIED.

Plaintiffs’ motion to renew their motion to compel Defendants to produce items 1-11 listed in their privilege log for in camera inspection is GRANTED. Defendants shall submit the emails referenced in items 1-11 of their privilege log to the Court for in camera inspection within 20 calendar days of the filing of this Order. Following the in camera inspection of the documents, the Court will issue an order indicating whether Defendants shall be required to produce the clawed-back documents to Plaintiffs.